1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for non-cash benefits. Hargreaves Lansdown offers salary sacrifice schemes that can reduce your income tax and National Insurance contributions.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( Gross\ Pay \) — Your total annual salary before deductions
• \( Income\ Tax \) — Amount deducted for income tax
• \( National\ Insurance \) — Amount deducted for National Insurance
• \( Salary\ Sacrifice \) — Amount sacrificed for benefits

Explanation: The calculation shows your take-home pay after all deductions including any salary sacrifice arrangements.

3. Benefits of Salary Sacrifice

Details: Salary sacrifice can reduce your taxable income, potentially lowering your income tax and National Insurance contributions while providing valuable benefits like pension contributions or childcare vouchers.

4. Using the Calculator

Tips: Enter your gross annual salary in GBP, estimated income tax, National Insurance contributions, and planned salary sacrifice amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What benefits can I get through salary sacrifice?
A: Common options include pension contributions, childcare vouchers, cycle-to-work schemes, and technology purchases.

Q2: How does salary sacrifice affect my take-home pay?
A: While your gross pay is reduced, you pay less tax and NI, often resulting in higher net pay than if you bought the benefit with after-tax income.

Q3: Are there limits to salary sacrifice?
A: Yes, your pay after sacrifice must not fall below the National Minimum Wage, and some benefits have annual limits.

Q4: Does salary sacrifice affect my pension?
A: It can increase your pension contributions as more goes in before tax, but check if it affects your employer's contributions.

Q5: Can I change or stop my salary sacrifice?
A: Typically yes, but only at certain times (like annual benefits renewal) unless you have a life event that qualifies for a mid-year change.